The Effect of COVID-19 Act on the Application of Liquidated Damages in Malaysian Construction Industry

Leong, Khar Yee (2023) The Effect of COVID-19 Act on the Application of Liquidated Damages in Malaysian Construction Industry. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

This dissertation was carried out in order to determine the application of Liquidated Damages clause in a different situation and focus on the types of liquidated damages, advantages and disadvantages of the construction parties to enforce the Liquidated damages clause in the Malaysian construction industry. Paying liquidated damages to innocent parties due to a breach of certain provisions or criteria in the contract such as the delay of the project is a very common phenomenon in the Malaysian construction industry. Liquidated damages can be detrimental to a company as the amounts are very high. Normally if a construction company fails to complete their work on time, they will need to pay a certain amount of liquidated damages according to the contract but there may be some liquidated damages that are not enforced or partially enforced which need to depend on the situation. Basically, the Malaysian scene for liquidated damages is different from foreign countries as every country has its contract provision. Although the contract has stated the provision in the Appendix regarding the amount of liquidated damages to be paid due to the delay of the project yet there may have been a commercial settlement between both companies’ top management. This research provides information on the study of liquidated damages and focuses on the application and effect of the liquidated damages in the Malaysian Construction Industry including the benefits and drawbacks of having the Liquidated Damages clause in the contract, the calculation of preparing the amount of liquidated damages and others. This research even allows construction parties to have a further understanding of their rights which they are entitled to recover for compensation, especially during the lockdown which was imposed by the Malaysian government due to the Covid-19 pandemic. This is owing to the fact that many of the construction parties especially those senior managements that were early involved in the construction industry might be unaware of this statement. Furthermore, a questionnaire has been formed in order to collect the data from the respondents to analyse it. All the respondents are from the construction parties which work in Malaysia as the targeted group. Lastly, it is anticipated that this research will be able to provide the details related to the liquidated damages and also increase the awareness of construction parties on reading through all the details in the contract before signing an agreement in order to protect our own priority.